Property developer and investor Charter Hall is looking to increase its funds under management platform with the potential purchase of Westpac Banking Corp's $14.3 billion infrastructure investment business, Hastings Management.
Westpac on Monday said it had entered into exclusive discussions with Charter Hall to sell Hastings. It has been looking to sell the business, which has offices in Melbourne, Sydney, London, New York, Singapore and Seoul, for more than a year.
![Bold expansion: Hastings was a member of the consortium that bought Transgrid for $10.3 billion.](http://web.archive.org./web/20170727141059im_/https://www.fairfaxstatic.com.au/content/dam/images/g/k/k/w/y/g/image.related.articleLeadwide.620x349.gxh77w.png/1500879909783.jpg)
Any deal, which is subject to due diligence and regulatory approvals, would give Charter Hall a springboard overseas and into a new business silo.
According to brokers at Macquarie Equities, there were merits in Charter Hall extending its significant domestic and international property investor relationships and retail distribution channels into new infrastructure opportunities.
![Ready for take-off: Hastings has also invested in Melbourne's Tullamarine Airport.](http://web.archive.org./web/20170727141059im_/https://www.fairfaxstatic.com.au/content/dam/images/g/k/v/7/w/m/image.related.articleLeadwide.620x349.gxh77w.png/1500879909783.jpg)
"Indeed, listed and unlisted investment teams across real estate are increasingly also considering opportunities in infrastructure," the analysts said. "The rationale for combining two fund managers with specific experience in each sub-sector appears reasonable."
Charter Hall chief executive David Harrison declined to comment on the deal, saying he and Westpac would provide an update on the outcome of negotiations.
Hastings is 100 per cent owned by Westpac which was acquired over two separate tranches. Westpac acquired 51 per cent of the group in October 2002 for $36 million.
The vendors are mainly the founders and initial shareholders. But the bank has been looking to sell and it is understood Charter Hall made the first approach.
![Negotiations: Charter Hall approached Westpac and is in negotiations for Hastings.](http://web.archive.org./web/20170727141059im_/https://www.fairfaxstatic.com.au/content/dam/images/g/x/d/l/l/1/image.related.articleLeadwide.620x349.gxh77w.png/1500879909783.jpg)
The Melbourne-based Hastings has been in operation since 1994 and on behalf of institutional investors, invests in airports, toll roads, Melbourne Airport, seaports such as Newcastle in NSW, and Northern Ireland gas distribution company Phoenix Natural Gas.
Macquarie Equities said vendor expectations for a price above $500 million appeared to be unlikely. They said given this would be a new investment discipline for Charter Hall, "we envisage limited front office synergies, with any savings likely to come from back office efficiency gains".
Hastings also recently bought the NSW government's land registry business and was a member of the winning consortium to buy the state's electricity transmitter TransGrid. These businesses will add to Charter Hall's third-party management business, which it has earmarked as a growth sector.
The brokers said if the deal were completed, it would be a "company-transforming transaction for Charter Hall, combining two similar skill sets in two asset classes that are increasingly being viewed as one".
The rationale for combining two fund managers with specific experience in each sub-sector appears reasonable.
Macquarie brokers
"The mid-point of the above earnings base and multiple would imply about $250 million consideration. Nine times would improve the accretion of the deal to about 5.5 per cent. We also note Hastings has lost some senior personnel of late, with the cultural fit and incentive scheme clearly crucial in any potential deal with Charter Hall."
Under Mr Harrison, Charter Hall has increased funds under management to $17.5 billion across the office, retail and industrial sectors. The group has offices in Sydney, Melbourne, Brisbane, Adelaide and Perth.
Its most recent deal, in late June, was when its $2.4 billion wholesale Prime Industrial Fund purchased a 24.89-hectare site with improvements of 81,008 sq m from Coca-Cola Amatil on a 20-year sale and leaseback arrangement.
The property,at 220-260 Orchard Road, Richlands, Queensland, was acquired for $156 million. Charter Hall is being advised by JPMorgan on the Hastings discussions.